Public servants may lose redundancy payouts if they turn down the offer of another job in the state sector.

Reforms to the State Sector Act, which are yet to have their first reading, would stop state sector staff from "double-dipping".

Double-dippers are those who get a redundancy payout and then quickly return to the public service in another role.

But the Public Service Association fears the amended act would do the opposite, encouraging public servants to go to the private sector so they do not lose their payouts. "We think if people are made redundant and they manage to find a job [in the state sector], that doesn't cancel out their entitlements," national secretary Brenda Pilott said.

The move reflects a change of focus for the State Services Commission, which wants departments to work more closely and remove barriers to staff working across the sector.

Under the proposal, if a public servant accepts another state sector job before their current job comes to an end, their redundancy will be cancelled on the basis that "they continue in paid employment".

More controversially, a worker would also lose redundancy if they were offered an alternative job, whether or not they accepted it.

Gordon Davis, the commission's chief legal adviser, said the aim of the bill was "to be fair to both employers and taxpayers".

And he emphasised that an "alternative job" did not mean any job. Alternative jobs had to have comparable duties and responsibilities to the employee's current position, be in the same general locality or within reasonable commuting distance, and on terms and conditions "that were no less favourable overall".

Staff who took an alternative job would also retain long-service benefits, which have previously been lost when moving across departments.

Employment lawyer Susan Hornsby-Geluk, of Chen Palmer, said the changes were based on the concept that public service workers were ultimately employed by the Crown, not individual departments.

"The analogy is like working for a large company - if you're made redundant in one part of Fonterra, but made an offer of a similar role in another part of it, you shouldn't expect to receive compensation when your employment hasn't ended with that employer."

But there were many cultures and contractual conditions within the public sector, and many staff did not see themselves as part of one big entity. "Employees within the public sector generally make quite deliberate decisions about which agency they wish to work for, and many would react poorly to being compelled to work for a different agency from the one they signed up to."

She did not think the Government would make any attempt to claw back redundancy if people left and later found another public service job.

"To do so would likely mean that the Crown would become a highly unattractive employer."

Ms Pilott said the bill as it stood would encourage public sector staff to "take the money and either move to the private sector or come back on a contract basis".

Cases of "double-dipping" were unusual and public servants who faced the stress of redundancy deserved compo regardless.

"The war stories about the person who left with a huge payout on Friday and walked into a new job on Monday are really rare. I suspect those occasional examples are greatly outweighed by people spending weeks watching their payout dwindle."